Why Plug Power Stock Is Likely To Continue Its Rally

Plug Power (NASDAQ: PLUG), a company that sells hydrogen fuel cell systems that are used in the material handling and power backup space, saw its stock rally by over 9% last week (five trading days), outperforming the S&P 500 which was up by about 2.5% during the same period. The recent gains come as the company reported its long-delayed Q1 2021 earnings, posting a slightly wider than expected net loss, although its revenue outlook for Q2 was stronger than expected. The earnings were postponed as the company had to restate its results for the prior three years due to some accounting errors. The restatement was completed in May, and the overall changes were apparently very small.

Now, PLUG has been a very volatile stock. While the stock rose from levels of about $4 in early 2020 to levels of around $66 in January 2021, as investors doubled down on futuristic stocks through the Covid-19 pandemic, it has since declined to about $32 per share, as the restatement and a broader pivot away from highly valued growth names hurt the stock. So will Plug Power stock continue to rally over the coming weeks and months, or is a correction looking more likely from current levels?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for Plug Power stock average close to 14% in the next month (21 trading days) period after experiencing a 9% gain over the last five trading days. The stock is also likely to outperform the S&P 500 over the next month, with an expected return that would be 12% higher compared to the S&P 500.

But how would these numbers change if you are interested in holding PLUG stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test PLUG stock chances of a rise after a fall and vice-versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF PLUG stock moved by -5% over five trading days, THEN over the next 21 trading days, PLUG stock moved an average of 8%, which implies a return that is about 6% ahead of the S&P 500.

More importantly, there is a 54% probability of a positive return over the next 21 trading days and a 51% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of PLUG Stock Movements:

Question 1: Is the average return for Plug Power stock higher after a drop?

Answer:

Consider two situations,

Case 1: Plug Power stock drops by -5% or more in a week

Case 2: Plug Power stock rises by 5% or more in a week

Is the average return for Plug Power stock higher over the subsequent month after Case 1 or Case 2?

PLUG stock fares better after Case 2, with an average return of 7.9% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 10.8% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Plug Power stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Plug Power stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For PLUG stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although PLUG stock appears to be an exception to this general observation.

PLUG’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Plug Power stock by changing the inputs in the charts above.

See our theme on Hydrogen Economy Stocks for an overview of U.S. companies that sell hydrogen fuel cells, related renewable energy equipment, and supply hydrogen gas.

See all Trefis Featured Analyses and Download Trefis Data here

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